opinion

China-Canada trade relationship bears watching

The weather in Canada and the U.S. has been the focus for commodity markets. Improved conditions have allowed farmers in the Corn Belt and Plains to get some harvest done after dealing with cold and wet conditions for the last several weeks. There is still more to be done, but this shift has taken the market's attention from the ongoing trade saga.

The recent renegotiation of the North American Free Trade Agreement was a big deal for farmers in both the U.S. and Canada. In reality, not much changed from an agriculture perspective other than greater access to Canada for U.S. dairy products. But simply coming to an agreement alleviates many fears that trade between the U.S. and Canada would be greatly impacted going forward, and separate deals would have to be worked out between Mexico and the other countries.

But the one piece of the new NAFTA deal that is getting attention is some language around Canada's ability to deal with China. This is a critical item as the conflict between the U.S. and China is opening the door for other countries to take business with the world's second-largest economy, and the U.S. seemed to build in some roadblocks for Canada in the new NAFTA.

Additionally, the U.S. does not seem much closer to any sort of resolution with China. Though the heads of the two countries may be planning a meeting at the end of the month, it is not expected that an agreement will be reached.

The U.S. recently withdrew from a postal agreement that has gone back decades. And the U.S. administration remains vocal about China's position on intellectual property.

China, on its part, is claiming that they have plenty of soybeans during a time when imports from the U.S. typically pick up (around harvest time). This suggests that both are settling in for a long, drawn out negotiation process. But China's GDP growth is slowing which could turn up the heat on getting some sort of deal done in 2019.

Wheat

Wheat markets have been quiet for the last month. In the U.S., plenty of moisture is beneficial for the winter wheat crop that is being planted, even if planting progress was slowed a bit by the rains. Conditions are good in the EU and former Soviet Union states, as well. Even Australia has had some good rains which may limit damage to the drought-stricken crops. Look for prices to be steady in the coming weeks.

Durum

Durum prices dropped further, showing that the market is well supplied and buying interest is low. The Minneapolis market fell 25 cents per bushel in the last week. Do not expect any excitement in the coming months.

Canola

The canola market worked its way lower this week. Prices broke with some pressure from the soybean oil market, as well as improved weather conditions for harvest. Cold and wet conditions are expected to return later in the month, so farmers will have to get a lot done in a short time (which they have proved over and over again that they are capable of doing) to get the crop done. If not, some of the canola crop will have to wait until spring to be harvested.

Peas and lentils

Pulse markets have been steady. There has not been much change besides the weather in Canada to drive prices. Attention is on India's import restrictions and the impact that will have on export business in the year ahead.

Mustard seed

Mustard seed markets have been mostly steady, even with the slower harvest in Canada. The crop is nearly done, but progress in October has been very slow given snowy conditions. Improved weather this week should have helped farmers get some work done, however.